For most of us, divorce isn‘t something we think about for older adults. Indeed, for many years, sociologists and economists didn‘t focus their research on middle-aged and elderly adults who sought divorces.
However, in recent years, scholars have begun turning a closer eye toward divorce trends in these couples. Jay Lebow, a psychologist who works at the Family Institute at Northwestern University, has emphasized the sharp increases in late-life divorces, or “gray divorces,” as they‘re often called.
When older couples divorce, a number of issues arise that don‘t tend to affect younger couples as drastically. One such issue for late life divorce is the financial consequences of property division. What happens when retirement assets are divided? Who gets social security benefits and health insurance? And where did all the time go in which to recover from the financial losses of a divorce?
Less Time for Financial Recovery
While most divorces set couples back financially for a period of time, that‘s a luxury that many older adults don‘t have. There‘s less time to “recover from any financial shortfalls or mistakes” that result from the divorce, according to Lynn Lawrance, a certified financial planner with the Financial Network Investment Corp. For many older adults, especially those who have already retired, there‘s just not a lot of time to recover from financial setbacks.
In particular, the division of assets, specifically retirement savings, means that the couple will each have to live on substantially less money than they had initially planned. In short, the couple isn‘t going to be able to live as inexpensively on their own as they‘d be able to if they were together. For many elderly adults, this realization means taking on a job to supplement income even after they‘ve officially retired. And this could mean a quick end to any real years of retirement.
According to an article in the AARP Bulletin, older couples are already financially vulnerable in America as our country continues to struggle economically. Thus, when elderly couples split up, they‘re often left feeling even more financially drained, and without time to recover. Ginita Wall, a San Diego CPA and certified divorce analyst, told the AARP that these seniors often get into situations where they “end up with only have of what [they] had when [they] were married, and half can feel like nothing.” A family law attorney emphasized this timing element, telling AARP, “Keep in mind that many consequences of divorcing later in life revolve around one fact: less time to recover financially, recoup losses, retire debt, and ride the waves of booms and busts.”
Financial Planning for Late Life Divorce
Certainly, time is a factor. At the same time, divorces among elderly couples often have special considerations, which amplify the financial consequences of divorce. According to an article in the Journal of Financial Planning, These couples will deal with unique issues when it comes to the division of property: homeownership, retirement assets and savings, social security withdrawal, and the splitting up of annuities and life insurance policies. In addition, health issues might be in play, and divorcing older couples might have to consider the use of guardians as decision-makers at stages of the divorce process, as well as through and the stages of estate planning that will accompany the divorce. For elderly divorcees, estate planning is always going to be part of the process.
What does all this mean? In short, couples are likely going to have to split retirement savings, and as we‘ve mentioned, the amount isn‘t going to be enough for each spouse to live comfortably on his or her own. Then, many elderly persons are counting on social security benefits in their retirement years. But when there‘s a divorce, each spouse may not be entitled to draw on all of those benefits, especially if the couple was married for fewer than 10 years.
In addition, health insurance will be a key factor for these older couples. If both spouses worked during the marriage and maintained health insurance through their own employers, they won‘t have to make any major changes upon divorce. However, if one spouse relied on the other‘s health insurance benefits, that non-employed spouse might have to begin worrying about where they will acquire health insurance benefits.
These factors can be overwhelming for many older adults who are in the process of a divorce. If you have questions about financial planning during a late life divorce or concerns about the division of retirement savings and other assets, contact the experienced family law attorneys at Collins & Collins today to discuss your case.